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Procurement >> Buying Power

By Matt Villano

02/03/06

Technology product procurement can be a daunting task for a college or
university—especially a smaller institution—to accomplish alone.
Perhaps this is why these schools are tackling it by banding together.

Even if you’re not a diehard Beatles fan, you probably know the song,
With a Little Help from My Friends. Perhaps nowhere is the message of this classic
tune more applicable than in the world of IT procurement for higher education.
When it comes to purchasing technology, a little help from your friends is the
key to economies of scale, which frequently net schools the best bargains available.
Simply put: Buying in bulk can offer significant advantages.

Over the years, a number of consortia have experienced these benefits firsthand.
In the Midwest, the Wisconsin Association of Independent Colleges and
Universities (www.waicuweb.org)
buys laptops as a unit, and distributes the hardware among its 20 member schools.
In Appalachia, via the Maryland Independent College and University Association
(www.micua.org) and the Pennsylvania
State System of Higher Education, educators do the same with other
technologies. In fact, each of these academic federations spend millions on
technology every year. But without the consortium approach they’ve adopted,
the individual schools that comprise each of them would be spending a great
deal more.

Should schools in your region explore such consortium purchasing models? To
explore the realities of technology purchasing consortia, Campus Technology
sat down with prominent leaders of two such organizations: the Claremont University
Consortium (www.cuc.claremont.edu)
in California, and the Massachusetts Higher Education Consortium (MHEC; www.mhec.net).
While Claremont is a relatively small consortium consisting of seven schools,
MHEC is mammoth, comprising 83 schools and more to come. Across both consortia,
many campus leaders hail the pros of the collaborative buying approach, while
some are keenly aware of the cons. Still, there’s no disputing that consortium
buying has changed the face of procurement forever. Perhaps two heads really
are better than one.

Living Large

Good deals come in spades for the Massachusetts Higher Education Consortium.
The organization, a consortium of 83 schools across Massachusetts and most recently
Rhode Island, is one of the largest academic consortia in the country. Since
it was founded in 1967, MHEC has brokered $1.7 billion in contracts. Last year
alone, the group negotiated nearly $180 million in deals—more than 80
separate deals with nearly 600 vendors. Notably, more than half of the consortium’s
overall expenditures last year were on technology. As MHEC Chairman Jake Bishop
puts it, “technology is our anchor.”

MHEC tech deals break down into four major categories: a $66 million deal for
computers, peripherals, memory, and hard drives from CDW-G (www.cdwg.com);
a $16 million deal for telecommunications networking devices such as hubs, routers,
racks, and fiber optic cable; a $13 million deal for printers from Canon (www.canon.com),
Xerox (www.xerox.com), and
Toshiba (www.toshiba.com);
and a $4 million contract for software from Microsoft (www.microsoft.com),
Adobe (www.adobe.com), and
others. Add in an $800,000 contract for mailroom equipment and a new contract
for outsourced document shredding and, as Bishop states, it’s clear that
technology really is the anchor at MHEC.

Campus Technology: Jake, what are the unique challenges
inherent in buying IT as a group?Bishop: One of the things we need to be concerned
about is the life expectancy of our equipment. Technology is changing so fast
that you can’t do long-term contracts because as soon as you put one in
place, new technology comes out. We allow for tech refresh by keeping contracts
short—no more than one year. This way, we can stay agile and make sure
we get the best of the best for all of our constituents. When we do bid, we
ask vendors to make offers for complete product lines. We don’t go out
and say we want Model X; we tell them that we want them to bid Brand Y. So far,
the strategy has proven to be flawless.

What is the greatest key to your system’s success?
Once a contract is in place, we step aside and the schools deal directly with
vendors. In order to facilitate this, everything g'es through a portal created
by Supply Guys [www.supplyguys-hardware.com;
based in Hadley, MA]. In the past, we were spending about $50,000 a year to
print contracts on paper and send them through the mail to the schools. Now,
because we have the contracts online, we’re printing fewer and fewer paper copies,
only for those who still insist on them.

E&I Going Strong

No story about procurement consortia would be complete without mention of
the Educational & Institutional Cooperative Purchasing (www.eandi.org).
The organization, known commonly among purchasing managers as E&I, uses the
combined purchasing power of more than 1,500 member organizations to lower
costs on a wide range of products and services. It also provides members with
access to a diverse portfolio of contracts for just about every product under
the sun.

Most recently (late last year), E&I inked a deal with schools in the California
State University system, a federation of 23 comprehensive and polytechnic
institutions across the Golden State. The first contract issued by E&I under
this agreement was through OfficeMax (www.officemax.com)
for significant discounts on office products.

Tom Fitzgerald, CEO of E&I, notes that other contracts were expected to follow
rapidly as 2006 gets underway. “E&I’s strategic approach to purchasing will
enable new efficiencies for the entire CSU system,” he says. “We’re excited
to be working so closely with [them].”

Yet, the CSU system isn’t the only academic body to be making headlines with
E&I these days. Merrimack College (MA), a small liberal arts
school with limited ability to compete against larger Northeast institutions
for good prices, recently signed up to take advantage of cooperative pricing.
Since then, the school has benefited from contracts with vendors who sell
everything from technology and scientific equipment to furniture and graduation
gowns.

Other big wins for E&I include a new contract with the Stevens Institute
of Technology (NJ), and a contract extension with the Committee on
Institutional Cooperation Purchasing Consortium (CICPC) which, through 2008,
includes 11 Big 10 universities and the University of Chicago
(IL).

The E&I effort was launched in 1934 by members of the National Association
of Educational Buyers, which just recently changed its name to the National
Association of Educational Procurement (NAEP). For additional information,
visit www.naepnet.org.

How d'es the portal work? When our member schools
use the portal to drill down and look at a contract, they click on several places
and go right to the vendor’s Web site to place their orders. They don’t
put the orders through us; they go straight to the vendors. This setup maintains
that vendor-customer relationship which is so important to both sides. Behind
the scenes, we’ve already worked with vendors to enable our member institutions
to use a procurement card and purchase items that way. This greatly streamlines
the process. Finally, after the purchase has been made, the system is designed
to sync up with the ERP and procurement systems at individual schools. It really
is that easy.

What has your biggest challenge been so far? Even
in our high-tech society, you still have people who aren’t comfortable
operating computers. Because of this, the biggest challenge for us has been
getting every one of our members to work online; many of these people are still
working off paper copies. Purchasing agents pushing small orders around on paper
is not a good use of their strategic time. And look at the numbers: Processing
a purchase order today costs something in the range of $100 to $150. If you’re
buying $100 worth of stuff, you’ve doubled your administrative costs,
really. But getting people comfortable with computers, getting them to look
up contracts and pricing online is a big challenge, and it’s not completely
solved yet. We’re working toward it every day.

What’s next for MHEC? New England is a unique
place in that the high number of schools here are a bit of a captive audience,
so there is still a lot of potential to grow here. Massachusetts alone has 125
colleges and universities; [our consortium] has more than 80 of them. We also
recently had the first school from out of state join: Bryant University
[RI]. In due time, more of them will join, and more of the newcomers will be
from states in which they don’t have a consortium or body of contacts
they can share. It’s a good idea for schools like these to take advantage
of consortia and add more tools to their tool bags.

Going Small

While MHEC encompasses more schools than you’d find in many small states,
the Claremont University Consortium in California operates on a significantly
smaller scale. At Claremont, five undergraduate and two graduate institutions
have joined forces to save money in a variety of areas, including library services,
telecommunications, facilities and maintenance, and information technology.
The campuses of these schools are physically next to one another, which makes
collaboration that much easier. The schools take turns playing lead on each
particular project—a strategy that keeps everyone involved.

Four years ago, for instance, schools in the CUC worked with networking giant
Cisco (www.cisco.com) to
set up a gigabit Ethernet backbone that connects all seven campuses. Then, in
2003, the school signed up for telecommunications services from Verizon (www.verizon.com),
and an enterprise resource planning (ERP) software package from Jenzabar (www.jenzabar.net).
Since then, the schools have purchased an e-mail filtering service from Postini
(www.postini.com), as well
as SPSS (www.spss.com) for statistics, and
MathLab, a math program from MathWorks (www.mathworks.com).
Ken Pflueger, CIO at Pomona College (CA), estimates that these
deals alone have saved his school millions.

Campus Technology: Ken, how d'es the Claremont University
Consortium work?Pfleuger: The consortium makes technology purchasing decisions
in the central office. There’s an advisory committee, with representation
from each campus. This committee oversees issues of policy and procedure, and
it reviews the budget, too. The committee members meet the third Wednesday of
every month. When we decide we want to explore a new technology, there is discussion
about that technology, then we decide which school will pilot it. At Pomona,
for instance, we’re currently testing Voice over the Internet Protocol,
or VoIP. We’ll report back to the group in a few months, then all of us
will make a decision about whether we want to move forward with full deployment.

What kinds of individuals sit on this committee?
The committee has a wide variety of people on it, and most of the campuses have
two representatives. In other words, each school has one vote, but each school
has more than one person at the table. Specifically, the directors of IT from
each campus are on the committee. There’s a finance officer from one campus,
an academic dean from another. One campus sends its vice president of planning.
There’s mixed representation so it’s not just tech people. One key
exception is that there are no students.

Can a member school make a technology purchase independently?
If it’s clear we can get some sort of consortium pricing, then we’ll
go through the consortium. If it d'esn’t make any difference price-wise,
then we may or may not. Replacing desktop machines is a great example: As a
consortium, we agreed to standardize on Dell (www.dell.com).
In working with them, however, there was no price break by doing it as a consortium,
so we ordered individually. Another good example is storage area networks (SANs):
Those campuses that have them bought them independently, but behind the scenes,
we agreed to implement the same hardware so we would be able to share and develop
internal expertise.

What would you say is the biggest benefit to consortium members?
While saving money is certainly something we’re interested in doing, we
try to keep the focus on the fact that by doing things together, there are other
benefits that are hard to place a monetary value on. We’re small schools,
and none of us has huge staffs, so the consortium allows us to develop internal
expertise together. Membership gives each of us our own set of local people
to call and bounce ideas off of. These are the really valuable benefits. Are
we saving money? Of course. But even if we weren’t, this would be a good
thing to do for all of the other intangible benefits that come by being involved.

A Different Kind of Consortium

Many colleges and universities get good deals on computers by rolling their
purchasing power into consortia. For schools with greatly restricted budgets,
however, the best deals might just come from buying equipment through the
philanthropic Computers for Schools Program (www.pcsforschools.org),
a not-for-profit organization that collects old computers from the corporate
world, refurbishes them, and resells them to colleges and universities at
prices that just about any institution can afford.

The Computers for Schools Program approach is simple: First, the organization
receives three- to four-year-old computers from corporations and individuals
who want to get rid of their equipment in an environmentally responsible manner.
Next, through a network of volunteer computer technicians, the program erases
the computers hard drives and rebuilds the systems with custom hard drive
images. Finally, the program resells the machines with three-year warranties
that guarantee performance as well as maintenance.

“Most schools like to buy new, but budgets are getting tighter and
tighter,” says Willie Cade, who launched the organization out of his
Chicago home in 2000 and now serves as president. “Refurbished [machines]
can be a good way to stretch their budgets by using the right tool for the
right job.”

So far, Computers for Schools has been most popular with schools in the K-12
space. As Cade explains, however, an increasing number of higher education
institutions are turning to his organization as well. Computers for Schools
also handles disposal for schools, and if the organization can’t reuse
a piece of equipment, then it will de-manufacture it and recycle most of the
components—anything to get machines back into student hands quickly.
“Eliminating the digital divide in the next decade is possible and we
should do it,” Cade says. “Our goal is nothing short of bridging
that divide.”

We can see that the benefits are many, but what about the challenges?
Even though most of our schools are undergraduate colleges, each has a unique
identity. Sometimes, issues arise and personalities of the individual institutions
clash. Another way to put this: Pomona is the wealthiest of the schools, with
an endowment of $1.3 billion dollars. Sometimes what’s best for us isn’t
best for other schools in the consortium. Also, because we have different constituencies,
we each get different pressures from our boards of trustees. At one of the schools,
the board is much more interested in IT. That’s not bad, it’s just
different. But, no matter what, via the consortium, it’s all about working
together.